3.1.2 Theories of corporate strategy Flashcards
define corporate strategy
the plans and policies developed to meet a company’s objectives
-concerned with the range of activities the business needs to undertake in order to achieve its goals
define distinctive capability
form of competitive advantage that is sustainable because it can’t be easily replicated by a competitor
define portfolio analysis
a method of categorising all the products and services of a firm to decide where each fits within the strategic plans
what are the two developments of corporate strategy?
Ansoffs Matrix
Porters Strategic Matrix
what is the corporate strategy?
the long-term plan to achieve the aims of the entire business
what will a successful strategy do?
give the firm an advantage in the competitive market place and fulfil stakeholders expectations
define ansoffs matrix
A marketing planning model that helps a business determine its product and market strategy
what does the ansoff matrix consist of?
define market penetration
a growth strategy where a business aims to sell existing products into existing markets
what is the aim when choosing market penetration?
increase market share
what do we do in market penetration?
by selling more existing products to the same target customers
-get existing customers to buy more
-widen the range of existing products
-increase sales
evaluate market penetration
focuses on markets and products it knows well
can exploit insights on what customers want
unlikely to need significant new market research
will the strategy allow the business to achieve its growth objectives?
define product development
a growth strategy where a business aims to introduce new products into existing markets
what comes along with product development?
Research and development costs of the new products
evaluate product development
plays to the strengths of an established business
strong emphasis on effective market research - insight into customer needs and successful innovation
a great way of exploiting the existing customer base
being first to market is important
define market development
a growth strategy where the business seeks to sell its existing products into new markets
what approaches are taken to market development?
-new geographical markets
-new distribution channels
-different pricing policies to attract new customers in different segments
evaluate market development
a logical strategy where existing markets are saturated or in decline
riskier than product development - particularly expansion into international markets
existing products may not suite new markets as it depends on customer needs
define diversification
the growth strategy where a business markets new products in new markets
evaulate diversification
risky strategy as there is no direct experience of the product or market, few economies of scale, but if successful risk is spread
-approach through innovation and R&D by developing new solutions, acquire an existing business in the market
give advantages of the ansoff matrix
simple and easy to understand
allows a business to consider multiple marketing strategies to improve the business
helps analyse the different risks and levels of investment
give some disadvantages of ansoffs matrix
competition and actions are ignored
ignores external influences -> use with a SWOT/PESTLE analysis
lack of cost benefit analysis
difficult to predict the impact the strategies will have
what is the challenge facing marketing strategy?
to find a way of achieving a sustainable competitive advantage over the other competing products and firms in a market
what does porters approach cover?
-two overall bus strategies that could be folllowed to gain competitive advantage
-differentiation and low cost being effective strats to gain a comp ad
define competitive advantage
An advantage over competitors gained by offering consumers greater value, either by lower prices or adding value
explain the porters generic strats table
cost differentiation
Broad scope COST LEADERSHIP DIFFERENTIATION
Narrow scope COST FOCUS DIFF. FOCUS
What is meant by low cost?
the objective to become the lowest cost operator
-involving production on a large scale -> exploit EoS`
why is low cost a source of competitive advantage?
if prices are similar, low cost will enjoy highest profits & offer lowest prices -> gain market share
suitable for standard products, markets w little product diff
what are some features of low cost operators?
high levels of productivity and efficiency
high capacity utilisation
use bargaining power to negoitiate lowest prices from suppliers
lean production methods
examples of low cost operators?
ryanair
poundland
aldi
what is meant by differentiation?
aim to offer a product that is distinctively diff from the comp w the customer valuing that differentiation
how can a business achieve differentiation?
superior product quality
branding
wide distribution channels
sustained promotion
give some examples of successful diff strats
apple
costa
dyson
what is stuck in the middle?
dangerous area as not either
facing competitors with low cost and highly differentiated products
-> suffer competitive disadvantage
give some examples of businesses stuck in the middle?
WHSmiths
Morrisons
sony
what is a hyrbid strategy?
mix of low cost and diff
ex is IKEA
-low prices through cost leadership
differentiatrs through unique designs and targets young global middle class
give some advantages of the porters generic strats
simple to pick one
easy to identify where a business stands
give some disadvantages of porters generic strats
not relevant in dynamic markets
oversimplifies market structure
not useful in crisis situation
how can CA be achieved throufh distinctive capabilities?
Architecture - contracts & relationships within the organisation
Reputation - links w brand image, around quality, reliability, service and prestige
Innovation - sustainable CA is when a business is able to innovate by developing a new product or process
define the boston matrix
is an analysis tool which enables a business to identify where they are in terms of market growtrh and market share
what are the four categories of the boston matrix?
Stars
Question marks
Dogs
Cash Cows `
what does the boston matrix look like?
Low relative ms HIGH RMS
High Market growth ? stars
Low Market g DOGS cash cows
what are the two exes used for boston matrix?
Relative market share - share in relation to competitors, measures products strength in the market
Market growth - measure of market attractiveness
what are features of stars?
high market growth
high marketing spend
positive cash flow
what are some strategies for stars?
invest to sustain growth
maintain or build market share
create barriers to entry
what are features of ?
low share of a fast growing market
neg cash flow
future is uncertain
give some strats for ?
invest to increase MS
try to build CA
Build selectively and invest in the most likely stars
what are some features of cash cows?
high share of a low growth market
likely to be in mature stage of PLC
Little potential for growth
large pos cash flow
strategies for cash cows
reduce investments -> maximise cf and profits
use profit to invest in? and stars
defend MS
what are features of dogs?
products which have failed or decline phase of PLC
low share of a low growth market
no real potential
negative cash dlow
what is the strategy for dogs?
remove of market
as uses up management time and reosurces
what are some + of the boston matrix?
useful tool for analysing product portfolio decisions
can help a business decide to invest or remove a product
what are some - of the boston matrix?
only a snapshot of current position
relative MS and MG are not the only dimensions important to a business
what is a strategy?
long term decisions to achieve objs based on a set of principles, set by the ceo and board of directors
-proactive decision making
forward thinking and future planning
what is a tactic?
short term response to an opp or threat in the market
managerial or supervisor level
supports the corp strategy
reactive to compp
made in isolation of the bigger picture
ex of strategies are:
HR hiring new staff to improve productivity
Physical - moving a factory to another location -> cost cutting
finance - issueing shares to raise capital
exs of tactics?
HR- hire a new network manager as old one quit
Physical - moving a factory layout to accomodate a new product being manufactured
Finance- Agreeing on an overdraft with the bank to cover a shortfall in a cash flow forecast
